Search our professionals' biographies to see their credentials and experience. Simply enter a last name and click Submit, or click on a letter of the alphabet below to browse for the name you wish to find.

SHARE

Investment Management Update

Date: November 07, 2016

In October 2016, the SEC approved amendments to the filing requirements in FINRA Rule 2210 and the disclosure requirements for bond fund volatility ratings in FINRA Rule 2213. The amendments were proposed in May 2015, and the amended rules will be effective January 9, 2017.

Rule 2210

Shareholder Reports

FINRA currently requires member firms to file the management’s discussion of fund performance section of a mutual fund’s shareholder report if the report is distributed or made available to prospective investors. Under amended Rule 2210, firms will no longer be required to submit the management discussion section, provided that the shareholder report, including the management discussion section, has been filed with the SEC.

Backup Material for Fund Performance Rankings

A firm that files a retail fund communication containing a performance ranking or comparison currently is required to also include backup material substantiating the performance or comparison in its submission to FINRA. The amended rule eliminates this requirement because FINRA now has online access to performance ranking and comparison information. The amended rule does require firms to maintain such backup material as part of their records.

Generic Mutual Fund Communications

Current Rule 2210 requires that firms file any retail communications “concerning” mutual funds. The amended rule will require only that retail communications concerning a specific mutual fund or mutual fund family be filed. For example, retail communications that describe different types of mutual funds (e.g., a description of balanced mutual funds) without promoting a specific mutual fund or fund family would not need to be filed with FINRA.

Templates

Firms are not currently required to file retail communications based on templates that have been previously filed and reviewed by FINRA. Firms are required to refile such communications if the narrative information in the communication has changed from the prior filing. Communications that fall into this category are often fund fact sheets or quarterly updates that provide information regarding a fund’s performance and holdings.

Under the amended rule, firms will no longer be required to file non-predictive narrative disclosure that discusses market events and portfolio changes during the period covered by the communication or that provides updated information sourced from a fund’s regulatory documents filed with the SEC.

Rule 2213

Bond Mutual Fund Volatility Ratings

Firms currently may use bond mutual fund volatility ratings in a retail communication, provided that the retail communication is accompanied or preceded by the fund’s prospectus, the retail communication is filed with FINRA at least 10 business days prior to first use and any changes to the retail communication provided by FINRA are made prior to its distribution.

Under amended Rule 2213, firms will not be required to have the prospectus accompany or precede a retail communication that includes bond mutual fund volatility rating disclosure. Firms also will only be required to file such retail communications within 10 days of first use, rather than 10 days prior to first use.

Further, the content requirements under amended Rule 2213 have been modified so that firms will no longer be required to provide the following in a retail communication that includes bond mutual fund volatility rating disclosure:

A separate risk disclosure statement that contains all disclosures required by the rule

All current bond mutual fund volatility ratings issued for the fund

Reasons for any change in ratings

Criteria and methodologies used to determine the rating

A statement that not all bond funds have volatility ratings

A statement that the fund’s portfolio may have changed since date of rating

FOR MORE INFORMATION

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.

This document may be considered attorney advertising in some jurisdictions.

Email Disclaimer

You must agree to Thompson Hine's terms and conditions set forth in the disclaimer below before submitting any email to us:

Thompson Hine LLP Disclaimer

This website provides general information about Thompson Hine LLP for the convenience of visitors to the site. The site and the content within it are not intended to establish and their use does not establish an attorney/client relationship between Thompson Hine and any visitor. Information on the website is not legal advice. Do not send confidential information to any of our lawyers without first obtaining specific authorization. This website includes photographs of our lawyers and staff. Some of the design images and photographs on our website may be of actors depicting fictional scenes. Statements on this website of prior results do not guarantee a similar outcome.

Attorney AdvertisingThis website may be considered attorney advertising in some jurisdictions.